Page 4449 - Week 12 - Thursday, 26 October 2017
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The ACT government was also keen to give industry confidence in the new process. The government did this by extensively consulting about the design of the reverse auction scheme and including a number of confidence-building and flexibility measures into the auction rules and legislation. These included the creation of an independent advisory board that would advise the minister on which auction proposals should receive a feed-in tariff entitlement and which gave industry confidence in the independence and probity of the auction process. The government instituted a limit on the maximum size of proposals, designed to ensure that there would be at least two winners from each auction. A 20-year feed-in tariff entitlement period delivered long-term revenue certainty to a winning proposal.
Chief among these measures was the contract-for-difference FiT mechanism which created complete revenue certainty for bidders, driving down financing costs and driving strong international competition in each of our auction processes. A further flexibility measure was the ability under the act for proponents to surrender or transfer a FiT entitlement to deal with unforeseen circumstances in which it was appropriate for the FiT entitlement to be discontinued. Proponents could apply in writing to the minister for a surrender or transfer of their entitlement, which the minister would then confirm by written notice, with the inclusion of the day and time that the surrender would take effect. The ability to surrender or transfer a FiT entitlement is covered in sections 14 and 15 of the act.
It has now been 3½ years since the commencement of the ACT’s first grant of the feed-in tariff entitlement, and the government has learned a lot through the operation of our scheme and about the industry context in which it operates. The government now considers that the right of proponents to surrender their FiT entitlement can be better balanced against the need of the government to maintain its renewable electricity supplies. No-one can predict the future, and market conditions may change in a way that might incentivise an entitlement holder to consider a surrender.
A review by Jacobs Australia, conducted under the act of last year’s next generation renewables auction and the act that I tabled in the Legislative Assembly in August, warned about the long-term possibility of FiT entitlement surrenders. The review said that, given that the ACT’s FiTs are not adjusted for inflation, the national renewable energy target scheme is due to finish in 2030 and given that, over time, wholesale electricity prices are likely to rise, there is a risk that FiT entitlement holders might contemplate a surrender.
If a surrender of an entitlement is brought forward, it is important that the responsible minister has time to consider and secure alternative renewable energy supplies so as to not put renewable electricity supplies in doubt. It is also important that industry has transparency of the government’s interests in this matter and the potential delay that may arise between the offer of an entitlement for surrender and the date set by the minister at which that surrender takes effect.
Today’s amendment bill introduces new matters the minister must consider when determining the day and time that a surrender takes effect under section 14 of the act. These new matters include the objectives of the act, other FiT entitlements that have
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